City Council opposes Gutman's bankruptcy plan

Published: Saturday, January 17, 2009 at 6:30 a.m.

Last Modified: Saturday, January 17, 2009 at 6:31 a.m.

OCALA - The City Council voted unanimously Friday to oppose a bankruptcy reorganization plan filed by developer Jorge Gutman that offers to sell the undeveloped City Shops & Walk property and repay the city and all the unsecured creditors in full.

The move was made at a special meeting after the council met for close to an hour behind closed doors with its attorney.

"However, there are aspects of the plan that we don't think are quite in the best interest of the city just yet, and we want to improve our position so that if the plan does get confirmed, we are in a better position," he said.

Gutman's attorney, Kevin Gleason of Hollywood, could not be reached for comment on Friday.

Under the plan, Gutman's JJH Investments LLC would sell the property and pay the city and other creditors.

The plan says the buyer, with a loan from a private party, intends to construct the project downtown, starting with a retail building and parking garage.

In March 2006, Gutman agreed to build City Shops & Walk - a 40,000-square-foot residential and retail complex off Fort King Street near City Hall in Ocala's downtown.

Gutman has failed to develop the property, which has since been dubbed "the sandbox."

As a result, the city is now embroiled in legal entanglements that include two state court cases involving foreclosures on the property, and Gutman's bankruptcy case, which impacts those foreclosure cases.

The city gave Gutman money to get the project started and helped provide him with the land.

Gutman now owes the city roughly $3.5 million, which includes $1.6 million that is not secured by a mortgage, $1.2 million that is secured by a second mortgage on the property, and about $950,000 of a first mortgage on all of the land.

Gutman's plan, which was filed with the bankruptcy court on Monday, is expected to be presented at a hearing between the city and Gutman's JJH Investments at 9 a.m. Tuesday in Fort Lauderdale.

The council on Friday appointed Ruse to attend the hearing as its representative along with Assistant City Attorney W. James Gooding III.

According to Gooding, Gutman's plan calls for the sale of the property by JJH to Makau Holdings LLC, a company in which Gutman is involved.

The sale will be financed by a private lender.

The plan says the proceeds of the sale are sufficient to repay the city and all the unsecured creditors in full.

"That's inaccurate," Gooding said. "They have left out some creditors."

Gooding recommended that the council oppose the plan.

"It doesn't provide any type of assurances that this is not just going to continue to be a running saga," Gooding said.

In order for the city to agree to the plan, it would have to include certain provisions:

The city wants Feb. 10 as a "drop dead" date by which Gutman must pay the city, or the bankruptcy case would be dismissed and JJH would be prohibited from refiling for a year.

Gutman would include trade creditors who were not originally included in the plan, and would permit them to file a late proof of claim.

The buyer, Makau Holdings, would be obligated to complete the project within two years and clean up the property within 30 days of the closing.

Gutman would pay some money to the city now to be forfeited to the city if the transaction does not close.

Gutman would reschedule the foreclosure sales with no additional opportunity to postpone.

"We believe the bankruptcy judge will deny confirmation of the plan as currently written," Gooding said. "We're going to fight unless they change the plan. Even then, the city is only reluctantly going along with it in the unlikely event that it works."

If the changes are made and the bankruptcy judge approves the plan, the city does not believe that Gutman will follow through and complete the project.

<p>OCALA - The City Council voted unanimously Friday to oppose a bankruptcy reorganization plan filed by developer Jorge Gutman that offers to sell the undeveloped City Shops &amp; Walk property and repay the city and all the unsecured creditors in full.</p><p>The move was made at a special meeting after the council met for close to an hour behind closed doors with its attorney.</p><p>"The plan essentially provides to pay us off," Councilman Charles Ruse said.</p><p>"However, there are aspects of the plan that we don't think are quite in the best interest of the city just yet, and we want to improve our position so that if the plan does get confirmed, we are in a better position," he said.</p><p>Gutman's attorney, Kevin Gleason of Hollywood, could not be reached for comment on Friday.</p><p>Under the plan, Gutman's JJH Investments LLC would sell the property and pay the city and other creditors.</p><p>The plan says the buyer, with a loan from a private party, intends to construct the project downtown, starting with a retail building and parking garage.</p><p>In March 2006, Gutman agreed to build City Shops &amp; Walk - a 40,000-square-foot residential and retail complex off Fort King Street near City Hall in Ocala's downtown.</p><p>Gutman has failed to develop the property, which has since been dubbed "the sandbox."</p><p>As a result, the city is now embroiled in legal entanglements that include two state court cases involving foreclosures on the property, and Gutman's bankruptcy case, which impacts those foreclosure cases.</p><p>The city gave Gutman money to get the project started and helped provide him with the land.</p><p>Gutman now owes the city roughly $3.5 million, which includes $1.6 million that is not secured by a mortgage, $1.2 million that is secured by a second mortgage on the property, and about $950,000 of a first mortgage on all of the land.</p><p>Gutman's plan, which was filed with the bankruptcy court on Monday, is expected to be presented at a hearing between the city and Gutman's JJH Investments at 9 a.m. Tuesday in Fort Lauderdale.</p><p>The council on Friday appointed Ruse to attend the hearing as its representative along with Assistant City Attorney W. James Gooding III.</p><p>According to Gooding, Gutman's plan calls for the sale of the property by JJH to Makau Holdings LLC, a company in which Gutman is involved.</p><p>The sale will be financed by a private lender.</p><p>The plan says the proceeds of the sale are sufficient to repay the city and all the unsecured creditors in full.</p><p>"That's inaccurate," Gooding said. "They have left out some creditors."</p><p>Gooding recommended that the council oppose the plan.</p><p>"It doesn't provide any type of assurances that this is not just going to continue to be a running saga," Gooding said.</p><p>In order for the city to agree to the plan, it would have to include certain provisions:</p><p>The city wants Feb. 10 as a "drop dead" date by which Gutman must pay the city, or the bankruptcy case would be dismissed and JJH would be prohibited from refiling for a year.</p><p>Gutman would include trade creditors who were not originally included in the plan, and would permit them to file a late proof of claim.</p><p>The buyer, Makau Holdings, would be obligated to complete the project within two years and clean up the property within 30 days of the closing.</p><p>Gutman would pay some money to the city now to be forfeited to the city if the transaction does not close.</p><p>Gutman would reschedule the foreclosure sales with no additional opportunity to postpone.</p><p>"We believe the bankruptcy judge will deny confirmation of the plan as currently written," Gooding said. "We're going to fight unless they change the plan. Even then, the city is only reluctantly going along with it in the unlikely event that it works."</p><p>If the changes are made and the bankruptcy judge approves the plan, the city does not believe that Gutman will follow through and complete the project.</p><p>"We want someone to develop the property and we want the property back," Councilman Kent Guinn said.</p><p>"There are people that have the ability and desire to develop it. Probably Mr. Gutman had the desire but not the alleged ability," he said.</p><p>Gooding requested Friday's closed-door meeting, which is permitted by law, stating that there was information he did not wish made public because it might give JJH an advantage at Tuesday's hearing.</p><p>A court reporter recorded the meeting.</p><p>The transcript will become public after the legal proceedings are completed.</p>